Westwood Homeowners Ass'n v. Lane County
1993 Ore. LEXIS 170, 318 Or. 146, 864 P.2d 350 (1993)
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Rule of Law:
Servitudes, such as covenants, conditions, and restrictions (CCRs) in a planned community, are not 'liens' or 'encumbrances' within the meaning of ORS 312.270(1). Consequently, they are not extinguished when a county acquires title to a property through a tax foreclosure sale.
Facts:
- In March 1980, the Westwood Planned Unit Development (Westwood PUD) was established, with all lots subject to a recorded declaration of Covenants, Conditions, and Restrictions (CCRs).
- These CCRs required every lot owner, as a mandatory member of the Westwood Homeowners Association, to pay annual and special assessments for the maintenance of common areas and other community purposes.
- The declaration stated that unpaid assessments would become a 'continuing lien upon the lot.'
- On May 27, 1988, Lane County acquired title to 15 lots within Westwood PUD through a statutory tax foreclosure proceeding for nonpayment of real property taxes.
- After acquiring the lots, the Westwood Homeowners Association levied assessments against the 15 lots for maintenance fees incurred post-foreclosure.
- Lane County refused to pay the post-foreclosure assessments, arguing that the tax sale had extinguished the CCRs.
Procedural Posture:
- Westwood Homeowners Association filed an action in Lane County Circuit Court (trial court) to foreclose its lien for unpaid post-foreclosure assessments against Lane County.
- Lane County filed a counterclaim to quiet title to the properties, free of the CCRs.
- Both parties moved for summary judgment.
- The trial court granted summary judgment for the Association and denied Lane County's counterclaim.
- Lane County, as appellant, appealed the decision to the Oregon Court of Appeals.
- The Court of Appeals affirmed the trial court's judgment in favor of the Association.
- The Oregon Supreme Court granted Lane County's petition for review.
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Issue:
Does a county's acquisition of property through a tax foreclosure sale, which under ORS 312.270(1) extinguishes all 'liens and encumbrances,' also extinguish pre-existing servitudes, such as Covenants, Conditions, and Restrictions (CCRs) that run with the land?
Opinions:
Majority - Unis, J.
No. A county's acquisition of property through a tax foreclosure sale does not extinguish pre-existing servitudes like CCRs, because these servitudes are not 'liens' or 'encumbrances' as intended by ORS 312.270(1). The court reasoned that 'liens' are specific claims for the payment of a debt, and while an unpaid assessment creates a lien, the underlying power to assess granted by the CCRs is not itself a lien. The term 'encumbrances' is more ambiguous, but the court interpreted it narrowly to mean money or security interests, based on its use in related statutes and legislative history, which focused on monetary charges. The court also applied the 'tax assessment approach,' noting that property values for tax purposes already account for the benefits and burdens of servitudes; therefore, the tax sale only conveys the property subject to those servitudes. Finally, public policy strongly favors preserving the character of planned communities, and extinguishing CCRs due to a single owner's tax delinquency would undermine the stability and value of the entire development and could raise constitutional due process concerns for other lot owners.
Analysis:
This decision provides critical protection for planned communities and homeowners associations by clarifying that their governing covenants survive tax foreclosure sales. It establishes that non-monetary property interests that define a community's character and value are distinct from financial claims and are not wiped out by the tax foreclosure process. This ruling reinforces the stability of private land use planning arrangements, ensuring that the expectations of homeowners and the integrity of a development are not destroyed by the tax delinquency of one or more lot owners. The case solidifies the 'tax assessment approach,' linking the scope of what is conveyed in a tax sale to what was valued in the underlying tax assessment, thereby influencing how servitudes are treated in future foreclosure cases.
